A way to pick stocks at record levels
CHOOSING stocks to pick up is always a difficult proposition. The task becomes even more difficult when the market has already started to trend and stock prices have relatively gone up. It becomes much more difficult when the market is already at record levels, like last week.
One approach is to look closely at the market’s weekly sector summary and list of top 30 stock gainers and losers. They will somehow allow you to see which sectors or types of stocks investors are willing to sell and/or eager to buy and keep.
As it was, the market ended strongly last Friday on a new record close of 7,689.91. This was due to the weekly gain of 140.98 points or 1.87 percent as the market managed to stay on higher grounds in four out of the five trading days last week.
Except for the services sector, which declined for the week by 7.11 points or 0.33 percent at 2,156.11, all other counters helped lift up the market to its latest record level.
Leading the lift was the financial sector with a 3.15-percent gain at 1,790. This was followed by the holding firms sector with a gain of 2.94 percent at 6,819.64.
Following closely was the industrial sector with a 2.92-percent gain at 12,691.84. Far behind but still in positive territory, allowing the market to stay higher, was the property sector with a gain of 0.18 percent at 2,992.90.
The market’s record close on Friday was its third in the week which was achieved despite the noticeably smaller daily average value turnover for the week of P11.6 billion compared to the year-to-date daily average value turnover of P12.32 billion.
This occurred as the market turned more bullish on news that the country’s gross domestic product (GDP) for 2014 grew at the favorable rate of 6.1 percent and by Wall Street’s overnight rally where its major indices ended on positive territory with the Dow Jones advancing 225 points. Being the end of the month, too, the market was further boosted by the usual month-end window dressing activities.
Added to the forgoing reasons, the market’s overall advance must also be due to foreign investors’ activities. They turned net buyers for the week and their market participation also increased to 46.60 percent compared to their year-to-date weekly average of 44.39 percent.
Added dimension
As pointed out earlier, only the services sector suffered a loss in last week’s trading. And, while the market’s average daily value turnover for the week was slightly lower than its year-to-date daily average value turnover, the market still ended higher.
The market’s weekly statistical summary also showed that there were two sectors that experienced an increase in total value turnover for the week. These were the property and financial sectors with an increase of 1.85 percent at P7.8 billion and 15.46 percent at P8.47 billion, respectively.
Incurring a big decrease in absolute amount of the total value turnover, but small in terms of percentage change, was the industrial sector. It was down 3.32 percent to P17.14 billion.
The total value turnover in the services sector likewise decreased 2.66 percent to P9.07 billion.
The holding firms sector had the biggest decrease in terms of percentage change. It was down 40.10 percent to P12.93 billion.
And, while down 11.79 percent in terms of percentage change, the mining and oil sector’s value turnover amounted to only P1.91 billion.
It is quite clear that in the market’s weekly sector summary, investors were just happy to let go of their property and financial stocks at last week’s prices.
A number of investors also sold a large part of their industrial stock holdings. Nevertheless, investors were, in general, quite unwilling to part with them.
Meanwhile, as investors sold their holdings in the services sector, there were fewer willing buyers than sellers at the time when prices slipped resulting in the overall loss of the sector.
The slip in the value turnover of the mining and oil sector need no further explanation. The sector has long been on the downtrend due to depressed oil prices. Investors have been avoiding the sector. Thus, the sector’s decline and its small total value turnover were the result of investors’ lack of participation in the sector.
Finally, it was very apparent that investors were unwilling to sell their stocks of holding firms during the week. This will explain the sharp percentage drop in the sector’s total transaction.
Bottom line spin
The market’s weekly sector summary is far from complete in providing a reliable picture of which sector or sectors—much less particular stocks—investors were willing to sell or buy. It has to be complemented by the list of top 30 stock gainers and losers.
To determine which stocks to pick up within the favored sector or sectors, however, one has to go through the usual stock selection and valuation process of fundamental analysis.
Back to the market’s top 30 stock gainers and losers, you will see that holding firm Max’s Group Inc. (MAXS) has done well again last week. It was second among the top 30 stock price gainers accompanied by good volume.
At its last traded price of P32.20 a piece last Friday, it was up by another 17.30 percent in one week. Compared to its price four weeks back, it is now up 31.16 percent.
Many industrial sector stocks also made it to the list. These were Del Monte Pacific Ltd. (DMPL), Calata Corp. (CAL), Jollibee Foods Corp. (JFC) and First Gen Corp. (FGEN).
While the sector posted a decline in the total value turnover, the said stocks made it to the list with significant volume of transaction during the week.
This makes holding firms and industrial sector stocks the stocks we are to pick. They are the market’s favorites. They are the stocks most investors are willing to buy—and hold further—even at higher prices.
(The writer is a licensed stockbroker of Eagle Equities Inc. You may reach the Market Rider at [email protected] , [email protected] or at www.kapitaltek.com)
